New Zealand is universally regarded as an open free-market economy, with low levels of regulation creating a favorable business environment. In fact, the World Bank regards New Zealand as the easiest country in the world to start a business in.
Agriculture, tourism, film production and winemaking remain long-standing cornerstones of the country’s export-driven economy, with exports accounting for almost 30% of the country’s GDP.
Unemployment in the country has been falling since the 2008 financial crash, with Statistics New Zealand reporting unemployment at 4.6% in September 2017.
Migration was a hot-topic during the country’s general election in September 2017. While record net migration has helped drive economic growth in recent years, it has also created growing concern about housing shortages, road congestion and overcrowding in New Zealand’s major cities.
Profit sector summary
New Zealand’s profit sector foodservice market was worth NZD$ 11.2 billion in 2016, following sales growth at a CAGR of 1.1% since 2014. This growth was below comparable economies, such as those of Australia (2.3% CAGR growth from 2014-2016), the UK (2.4%) and Canada (3.1%).
Value growth of the market is largely driven by population growth, with per capita expenditure on foodservices actually falling historically. In 2016, New Zealanders spent an average of NZD$ 2,404.56 in foodservice, a decline from NZD$ 2,443.98 in 2014.
Overall, New Zealanders are less likely to engage in out-of-home foodservices when compared to consumers in other countries. 22% of Kiwis cite eating outside of the home ‘less than once a month’ compared to global and Asia-Pacific averages of 16% and 10%, respectively.
Quick service restaurants summary
In 2016, New Zealand’s QSR market was valued at approximately NZD$ 2.9 billion, registering value growth at a CAGR of 1.3% since 2014. In the past week, 38% of New Zealanders have visited a QSR.
Despite the market coming under intense media scrutiny to provide healthier fast food options, operators have remained reluctant to stray from the well-known value proposition that has served them well historically. Reluctance is also driven by consumer demand for healthy alternatives to burgers and fries, which remain
highly niche. While some chains, such as Pita Pit and Habitual Fix have carved out success amongst these consumers, ‘healthy fast food’ remains far from mainstream.
With 56% of New Zealanders having visited or ordered a takeaway in the past week, it’s paramount that legacy brands embrace home-delivery services. Over the next five years, QSR revenue generated by takeaway transactions is forecast to grow at a CAGR of 2.6%, outpacing the CAGR of 0.6% for dine-in occasions over the same period.
Long-standing operators have sought to mimic their increasingly successful casual dining counterparts through outlet facility improvements which aim to lengthen dwell times. For example, Burger King has introduced free Wi-Fi and ‘entertainment zones’ across its restaurants.
Value in the channel is forecast to marginally accelerate to a CAGR of 1.5% over the next five years, with the market expected to reach a valuation of NZD$ 3.1 billion by 2021.
Full service restaurants summary
Valued at NZD$ 3.6 billion in 2016, FSR is New Zealand’s largest foodservice channel, accounting for 32.5% of total profit sector sales revenue. The channel’s sales value increased at a CAGR of 1.6% between 2014 and 2016, driven by moderate growth in transactions and outlets.
While 26% of New Zealanders visited an FSR in the week prior to taking the survey, this rose to 40% among those aged between 25 and 34. A trend towards fast-casual FSR is the result of growing interest among younger demographics, and consumers shifting away from fine-dining formats has caused weak growth in the average transaction value.
Over-saturation of the market remains a concern of operators. In 2016, there were 6,116 outlets across the country – one for every 760 citizens. With a large proportion of outlet growth occurring in Auckland and other major cities, rental and operational prices have steadily risen, placing strain on operator profit margins.
Takeaway and home delivery is expected to become a major source of income for FSR operators in the coming years. The significance of this is further highlighted by Pizza Hut’s decision to close down its sit-down restaurants in 2016, and transition into a delivery-only brand. Over the next five years, revenue generated by takeaways is forecast to reach a CAGR of 5.8%, far outpacing that of dine-in at 1.5%.
The sales value of New Zealand’s FSR channel is forecast to grow at a CAGR of 1.8%. By 2021, the market is expected to generate a revenue of NZD$ 3.9 billion.
Coffee and tea shops summary
Despite a long-standing coffee culture, New Zealand’s coffee and tea shop market is a relatively minor aspect of the country’s profit sector. Valued at NZD$ 377 million in 2016, the channel accounts for just 3.4% of total profit sector revenue.
Coffee and tea shops are still popular, with 47% of surveyed New Zealanders having visited an outlet in the past week. This has created strong outlet density – with one outlet for every 3,261 citizens.
Positive growth in the average transaction value and number of transactions and outlets is indicative of an increasingly lucrative market, and suggests the customer base is expanding. Much of this growth is stemming from younger demographics, which creates potential issues for operators wishing to maintain traditional atmospheres.
Globally, coffee and tea shops are often restricted operationally, with outlets unable to provide substantial food offerings owing to a lack of specialist staff, kitchen space and equipment. This isn’t the case in New Zealand, with top operators Columbus Coffee and The Coffee Club hiring full time chefs. As a result, coffee shops in New Zealand are widely viewed as viable eateries, with 14% of consumers having ordered a ‘main meal’ during their most recent visit.
Operators in the market are split between quality and price, with both facing external pressures. For quality-led coffee shops, such as Columbus Coffee or Starbucks, wealthy urbanites are increasingly being drawn towards high-end juice and smoothie bars that benefit from the increasing health-consciousness of consumers. On the price-focused side of the market, QSR operators are taking advantage of greater economies of scale to create fiercer competition on price with coffee and tea shops.